Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Peter Schiff: When the Sucker’s Rally Ends, the Dollar Will Crash

  by    0   4

The world loves dollars. Whenever there is a problem, people flock to the dollar as a safe haven. But the US has problems of its own. In a podcast, Peter Schiff said America’s problems will eventually catch up to the dollar and at that point, the greenback will crash.

Former British Prime Minister Liz Truss blew into office promising tax cuts in the face of historically high inflation. On the one hand, the Bank of England has been raising interest rates – a contractionary monetary policy. But tax cuts with no corresponding spending cuts increase budget deficits – an inflationary fiscal policy. The British markets recognized this contradiction. The British pound tanked and plunged to a record low.

The government quickly backtracked on the tax cuts and Truss ended up stepping down.

This raises a question that US policymakers need to wrestle with. Why exactly were the British markets concerned about tax cuts?

As Peter pointed out, they were concerned about increasing debts. The debt to GDP ratio in Great Britain is already around 85%.

Now, that is a big number. It is a number that should cause concern. I think, really, anything above 50% of GDP is too big a number. So, because these tax cuts threatened to send British debt to GDP even higher, investors rightly dumped the pound.”

But what did they do?

They bought dollars.

They sold pounds for dollars. But they were selling pounds because Britain has a debt problem. The irony is they were buying dollars despite the fact that the United States has an even bigger debt problem.”

The US national debt pushed above $31 trillion in early October. And the US government continues to pile onto that number. Uncle Sam ran a $1.3 trillion deficit in fiscal 2022. The debt to GDP ratio in the US is already 125%.

And as Peter pointed out, it is actually higher than 125% when you factor in state and local debt. When you include state and municipal debt, the ratio balloons to 140%.

We’re in a much bigger fiscal mess than Great Britain. So, selling pounds and buying dollars because you’re worried that Britain has too much debt is jumping from the frying pan into the fire.”

Why are people doing this? Because there is a perception that US debt doesn’t matter because the dollar serves as the global reserve currency. Therefore, the US dollar is the go-to when there is a problem, even if the problem is bigger in the US. Peter recalled that when S&P downgraded US Treasuries, people bought US Treasuries because they were worried about the downgrade.

People bought US Treasuries as a safe haven from US Treasuries. That shows you how ridiculous it is.”

In the same way, it’s absurd to sell a country’s currency because you’re worried about debt and buy dollars when the US has even more debt.

It’s important to factor state and municipal debt into the equation in the US because all of these governments are funding themselves from the same tax base.

These governments are trying to get blood from the same turnips. Beacuse Americans are broke. We have no savings. So, can we possibly repay this debt? Of course not. Repaying the debt is impossible. So, what’s going to happen? We’re going to default.”

Peter said there are two possible ways the US can default — the honest way or the dishonest way.

But either is a disaster if you own US Treasuries. The honest way is just to admit that we can’t pay and we default. We restructure the debt and we tell our creditors, ‘You are not going to get your money.’ But I don’t think politicians have the integrity to do that. They’re going to take the coward’s way out. They’re going to print. They’re going to inflate the debt away. That’s the only way out of this problem — monetize that debt and repudiate it through inflation, which is why it’s crazy for anyone to believe that the Fed is going succeed in reducing inflation back down to 2%. It can’t succeed.”

The government can’t inflate the debt away at 2% per year. They actually need higher inflation to handle the debt.

There’s another problem. The only reason the US government has been able to push the debt down the road for this long is that interest rates have been low. As rates go up, the problem gets bigger.

This is why Peter calls this a sucker’s rally. And when it ends, the dollar will crash.

Free Silver Report

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Peter Schiff: More Doom in the Data

In this episode, Peter recaps the latest batch of economic data, in which revisions to job numbers and a declining manufacturing sector bode poorly for the economy. He also analyzes gold and silver’s big week last week and offers some thoughts on President Biden’s recent post-debate interview on ABC.

READ MORE →

Peter Schiff: Silver has New Support at $30

In this episode, Peter recounts silver’s notable rise above $30/oz and addresses the latest FOMC minutes that were released this week, in which the Fed signaled that rate cuts could be delayed even further. Peter also calls out the SchiffGold Silver Breakout Sale to celebrate the metal’s long-awaited breakout. 

READ MORE →

Peter Schiff: There’s Still Time to Buy Silver!

Silver had a spectacular day on Friday, with a closing price of around $31.50/oz. This is the highest close for the metal since February of 2013. In response to this impressive rise, Peter recorded a special video on Friday for SchiffGold.

READ MORE →

Peter Schiff: Biden Brags About Raising Taxes

This week Peter’s back to discuss new economic data, Powell’s recent remarks in the Netherlands, and the Biden administration’s new tariffs. More and more signs point to economic stagflation, but Biden, Powell, and their cronies continue to deflect the blame and increase everyday Americans’ taxes.

READ MORE →

Peter Schiff: Biden Lies Again on Inflation

This week on the Peter Schiff Show, Peter covers a week of dismal economic reports. Both jobless claims and consumer sentiment came in worse than expected last week, with both figures missing predictions by a wide margin. Peter also discusses public statements made by both Joe Biden and Donald Trump on the nature and origin of inflation.

READ MORE →

Comments are closed.

Call Now